Written by Amy Legate-Wolfe at The Motley Fool Canada
It can be hard for investors to find new stocks that are due to rise. After all, how are we supposed to know what will do well, and what won’t? Luckily, in the case of Topicus.com (TSXV:TOI), there is one tried-and-true reason that investors can look forward to growth, even though it’s a brand new stock on the market.
Topicus stock: A spin-off
Topicus stock is the European offshoot of Constellation Software (TSX:CSU), and that right there is the reason investors should start paying attention to this stock. Constellation stock has become known as one of the best investments in the software industry in the last two decades. And it all comes down to acquisitions.
Constellation stock has a long history of growth through acquisitions, picking up software companies across North America and beyond, and turning them out under the Constellation name. This method of growth has worked wonders, leading to share growth of 1,449% in the last decade alone.
But those shares are now trading at around $2,680 as of writing. That’s a share price not many can afford to begin with. Beyond that, however, Constellation stock and its growth has certainly started to slow. Which is when Topicus stock enters the picture.
Getting in at the ground floor
Imagine you could go back in time and achieve the same level of growth that we’ve seen with Constellation stock. That is exactly what the company is attempting to do, but in a new market. Topicus stock has a focus on European software companies, acquiring them and pushing them out much in the same way as Constellation.
With a management team from Constellation leading the charge, Topicus stock is practically guaranteed to be successful in this spin-off project. While it remains to be seen if there will be as much growth as Constellation stock has enjoyed, it’s certainly a great way to get in at the ground floor.
Topicus performed well during the most recent earnings results. Revenue increased 23% year over year in the second quarter, with net income up to €23.5 million from €20.1 million the year before. Acquisitions completed brought in cash of €63.4 million, with future payments at an estimated value of €7.6 million. Therefore, the stock is already gaining traction, with more on the way.
More growth to come
Topicus now looks like a valuable company when we look at it compared to Constellation stock. However, it’s going to be the long-term holders that make the largest gains. Constellation stock has grown 1,449% in 10 years, true. But if you bought it back in 2007, growth would be even higher at 11,066%! That makes today’s share price of $106 look like pennies on the dollar.
Overall, Topicus has a strong management team with the backing of a hugely successful software company in Constellation. Shares are now up 51% in the last year alone, with very few dips in the meantime. Should it continue on the winning streak we’ve seen, it could very well become the next Constellation a lot sooner than the next decade.
The post Heard of Topicus Stock? Here’s Why You’re Missing Out appeared first on The Motley Fool Canada.
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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Topicus.com. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy.